World

Economic outlook better than feared: OECD

By AAP Newswire

The global economy is not doing as bad as previously expected, especially in the United States and China, but has still suffered an unprecedented drop due to the coronavirus pandemic, an international watchdog says.

The Organisation for Economic Cooperation and Development said in a report that the world's gross domestic product is projected to decline by 4.5 per cent this year - less than the 6 per cent plunge it had predicted in June.

The global economy is expected to rebound and grow by 5.0 per cent next year, the organisation said.

Yet the OECD notes that its outlook is "subject to considerable uncertainty" as the pandemic continues, and assumes that "sporadic local outbreaks will continue" and a vaccine will not be available until late in 2021.

The OECD upgraded its forecast for the US economy, anticipating a contraction of 3.8 per cent this year instead of a plunge of 7.3 per cent forecast previously.

China is expected to be the only country in the group of 20 most powerful economies to grow this year - by 1.8 per cent, instead of a drop of 2.6 per cent previously projected.

The OECD cut its forecasts for India, Mexico and South Africa.

The Paris-based organisation, which advises developed countries on economic policy, urged governments not to raise taxes or cut spending next year "to preserve confidence and limit uncertainty".

Fiscal and monetary support for the economy need to be maintained, it said.

"Everything needs to be done to strengthen confidence," OECD Chief Economist Laurence Boone told a news conference.

"That is really, really key to the recovery and to make it faster and larger."

Governments will especially need to keep helping people to find jobs and support investment, she said.

"So the first message we want to send is do not repeat the mistakes of the past, do not withdraw the fiscal support too early."